Earth Sciences 4211/6210! Putting the Economics Back in Economic Geology!

Transcription

1 Earth Sciences 4211/6210! Putting the Economics Back in Economic Geology! Stephen J. Piercey! Department of Earth Sciences! Memorial University! St. John s, NL, Canada! A1B 3X5! Special thanks to Cam Allen for the inspiration.!

2 Introduction! Economic geology within an economic context.! Mineral resource development sequence.! Mining and mineral exploration.! Types of companies.! Resources and reserves.! National Instrument and the Qualified Person.! Mineral resources in a Canadian context.

3 Economic Geology! Economic Geology: Science, Discovery, Economics!

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5 Mineral Resource Development Sequence! Slide taken from Closs and Glanzman! Key Decision Point! Feasibility! EXPENDITURE LOGARITHMIC SCALE! Rate of Expenditure! Regional Selection! High Risk! Area Selection! Prefeasibility! Decreasing Risk! Mine Production Initiation! Conceptual planning! Detailed planning! Recon. exploration! Targeting! Exploration drilling! Assessment drilling! Mine develop.! Mining! Decommissioning & rehabilitation! GCX ACTIVITY*! Public data review! Field Visit Assess environ/ dispersion processes! Regional Geochem survey! Detailed Geochem surveys! Env. Baseline! 3D Geochem! Data Quality! Geochem input to mine planning! Grade control, Reconcilliation, Env. monitoring! Remediation! * Integrated with other disciplines! Modified from Eimon, 1988!

6 Mining and Mineral Exploration! Mining and mineral exploration undertaken by numerous companies. Companies broken into two main groups:! Junior Exploration Companies! Do not produce, focus on exploration, often small. Various exploration/business models.! Major Companies! Significant market capitalization. Larger and produce commodities for profit.! Range of major companies from giant (e.g., BHP-Billiton, Rio Tinto), large (e.g., Teck, Barrick, Newmont), to mid-tier (e.g., Quadra- FNX, Hudbay Minerals).

7 Funding Mineral Exploration! Major companies - produce a product, so some of the profits are used towards exploration (exploration = R&D for major companies).! Junior companies - raise money through investors, often by issuing shares on a stock exchange.! Shares! Warrants! Often issue shares/warrants multiple times.! Flow through financing.! Dilution.! Goal is to control share structure.

8 Junior Companies vs Major Companies! Major companies are producers and have large staff and focused on production and mining. Mineral exploration is important, but the goal is to create more resources/reserves to maintain production.! Junior companies have various models - JV model, project generator, deposit definition.! Often small deposits can have significant impact on a junior company but are of no interest to a major as they do not effect the bottom line. Economies of scale.! Juniors can become majors. Most majors started small and grew over time.

9 Resources/Reserves! One of the main goals of mineral exploration is to find deposits to put into production.! Our measure of how much material of a given commodity we have in the ground is defined by resources and reserves, which are defined based on various parameters both geological and economic.! There are standard reporting guidelines for releasing resource and reserve information to the public (e.g., in press releases).! NI standards (CIM Best Practices)! JORC code! SAMREC

10 CIM Resource and Reserve Definitions! Mineral Resource - is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.! Mineral Reserve - is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.

11 Resources and Reserves! JORC/CIM Resource/Reserve Definitions!

12 Different Types of Resources!

13 Different Types of Resources!

14 Resources and Reserves! Demand for metals and the viability of mineral exploration and mining is directly related to supply and demand.! Resources are pounds in the ground.! Reserves have value.! Two deposits with exactly the same resource can have completely different value because of economic factors (i.e., one can be a resource and another a reserve!).! Whether or not a deposit is economic depends on numerous factors, most out of the control of geologist (e.g., world metal prices, power, road networks, political stability).

15 An Example! Izok Lake, NU! Total Metals! Duck Pond, NL! Total Metals! Cu (Mt)! 0.36! 0.17! Zn (Mt)! 1.88! 0.31! Pb (Mt)! 0.18! 0.06! Au (MOz)! 0.05! 0.14! Ag (MOz)! 30.88! 9.98! $ value of contained metal! $1,168,284,914! $591,773,673! One is in production, one isn t, why?!

16 National Instrument ! Standards for disclosing mineral resource information to the general public.! Provides strict guidelines as to how companies can disclose scientific and technical information about mineral projects to the stock exchanges.! Disclosing resource information requires the submission of a Technical Report that has to be written in a prescribed format and submitted to the securities exchange ( All work undertaken on a mineral project must be supervised by a Qualified Person.! A Technical Report must be written and submitted by an Independent Qualified Person.

17 Qualified Person! Critical component of the modern industry. Linked to being a PGeo.! A Qualified Person (QP) means an individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; has experience relevant to the subject matter of the mineral project and the technical report; and is a member or licensee in good standing of a professional association. CIM.! Only QP are permitted to release reserve or resource information to the general public. Furthermore, QP are allowed to release material to the public only if they have expertise in that field.! QP also required to release NI Technical Reports to the Stock Exchanges and general public.

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19 Qualified Person! Just because one is a PGeo does not imply they are a Qualified Person.! Qualified Person also carries an experience and expertise component.! If you do not have expertise and sufficient experience in a given area you are not a Qualified Person, despite potentially being a PGeo.

20 From Goodfellow (2007)!

21 From Lydon (2007)!

22 From Goodfellow (2007)!

23 From Goodfellow (2007)!

24 From Goodfellow (2007)!

25 From Goodfellow (2007)!

26 From Goodfellow (2007)!

27 From Goodfellow (2007)!

28 From Goodfellow (2007)!

29 From Goodfellow (2007)!

30 Mineral Resources in Canada: Summary! Major producers of Cu, Zn, Pb, Ni, Au, and Ag from VMS, magmatic Ni-Cu, lode gold, and to a lesser extent SEDEX, porphyry Cu-Mo.! Canada also an important producer of diamonds (e.g., Ekati).! Canada is also an important producer of iron ore (e.g., Labrador Trough).! Mining, quarrying, oil and gas contribute $53.9 billion to the GDP in 2010 (NRCAN).

31 Summary! Economic geology within an economic context.! Mineral resource development sequence.! Mining and mineral exploration.! Types of companies.! Resources and reserves.! National Instrument and the Qualified Person.! Mineral resources in a Canadian context.